Domestic indices continue to move within the previously formed upward trends. A noticeable gain in weight took place the day before due to the growth of oil prices, which crossed the $ 70 mark.
I would like to share my vision of the situation in the near future.
The ruble index, in my opinion, retains the chances of growth to 3795-3805 points, which is indicated by the height of consolidation from which it came out on May 25-26. The upper border of the current growing channel, in which the Moscow Exchange index has been located since February 1, 2021, also looks there.
So far, I don’t presume to predict whether the players will have an increase in strength and reason to go up from this channel or not, but I believe that the index may meet resistance near the level of 3800+ points.
Among the factors that hint at the proximity of local resistances is the RSI oscillator, which has risen to the value of 70+ and the presence of a combination of “three methods” on the daily chart of the index itself.
Why do I focus on these things?
As you know, the first appearance of an oscillator value in the overbought (> 70) or oversold (<30) area is usually just a warning. But re-crossing line 70 when the curve falls from the overbought area is often regarded as signal to take a short position…
It is clear that it is too early to talk about a second entry, however, during the periods of March 16-17 and May 10-11, there were no second entries (see the attached chart), and there was a pullback in the market.
As for the “three methods” candlestick combination, then yes, undoubtedly, this is a trend continuation pattern, but everywhere in the description there is an indication that it does not allow making long-term forecasts, but gives a guideline only for the next couple of sessions.
Also, the location of such a combination is also very important. So, for example, if the model is defined at the beginning of a bullish trend, then its potential is much higher than the same model found after a significant and prolonged increase in prices.
In our case, even if we take May 20 as a starting point, the trend has been going on for more than a day, not to mention the framework of the ascending channel itself. So buyers’ appetites should be tempered.
The RTS index has a similar picture; it has also already approached the upper border of its large growing channel, in which it has been moving since December 21, 2020. If it encounters resistance not near the level of 1630-1635 points, then the maximum of last year – the level of 1651.82 points will certainly make the players think about fixing the current “longs”.
And now a few words about oil, which will complete my reflections.
Yesterday’s OPEC + meeting turned out to be the fastest: within 15-20 minutes, the ministers adopted a recommendation to keep the planned plans to increase oil production in July. Brent quotes reacted with growth, rising to $ 71.17 per barrel. The previous time the peak was registered at the level of $ 71.38 and it was on March 8th.
If we connect the local lows in oil, starting from March 23 and ending on May 24, then visually any stock exchange trader will see a “triangle” on the oil chart. And it looks like a continuation pattern, but only a close above the peak of the pattern will be considered a breakout.
I do not yet understand what should be the catalyst for growth for oil prices, because if successful, Brent could rise in price to $ 80. This question haunts me.
And until I found the answer to him, the game from the “long” must be played with restraint. And only on condition that oil moves to a higher price range, it will be possible to expand the horizons for the movement of stock indices.
Scavo (Ignatenko) Anastasia